Lawrence Mishel, Sean O'Leary: If Right-to-Work Impacts Growth So Much, Why Leave it Out of Forecast?

Lawrence Mishel, Sean O'Leary: If Right-to-Work Impacts Growth So Much, Why Leave it Out of Forecast?

Charleston Gazette-Mail - In economics, if a factor has a big impact on growth, then you take that factor into account in your projections. Apparently, the Bureau of Business and Economic Research at West Virginia University does not do so. In March 2016 the Bureau reported that turning West Virginia into a Right-to-Work state by 2017 would have an “employment growth effect of 0.56 percent” each year, an almost doubling of growth. Yet, when the bureau released its annual Economic Outlook Report for the state in October, the projection was for employment to grow just 0.7 percent over the next five years, trailing the projected national average of 0.9 percent per year.

How could employment growth of 0.7 percent be reconciled with right-to-work legislation lifting employment growth by 0.56 percent? It can’t, and this should be very embarrassing to the Bureau of Business and Economic Research and damage its credibility.

Only two scenarios make sense. One is, if right-to-work had the impact that the bureau said it would, then employment projections should show growth of around 1.0 to 1.2 percent a year (adding the 0.56 to the 0.5 or 0.6 expected growth in earlier projections). This would show a sharp reversal for West Virginia’s growth compared to the nation. After years of lagging behind national growth, including the bureau’s right-to-work impact would show West Virginia exceeding national growth rates by 40 percent over the next five years, completely changing the state’s economic outlook. The other possibility is that West Virginia economic trends greatly weakened since early 2016, so perhaps the positive impact of right-to-work is offsetting this weakness. Neither explanation seems to work very well. It is noteworthy that the Bureau of Business and Economic Research report makes no mention of the state’s new right-to-work law, nor does the bureau report have any discussion of the newfound weaknesses of West Virginia’s economy.

It is easy to understand the discrepancies, however, and that is because right-to-work does not have any sizeable, positive impact on employment growth. In fact, the economic model (IHS Global Insight, based in Massachusetts) used by the bureau for its projections does not even incorporate a right-to-work impact. The bureau’s claim that right to work would almost double West Virginia’s employment growth is total fiction, and their employment projections simply confirm this. The bureau’s Economic Outlook does get it right, however, when it notes that West Virginia’s demographics remain a challenge to economic growth and that if the state wants to grow, then its economic strategies should focus in ways to improve health and education outcomes. So that would imply that instead of relying on the false promises of right-to-work, the state should be pursuing policies like paid sick days and family and medical leave, obesity prevention, increasing higher education affordability and apprenticeship programs.

Lawrence Mishel is president of the Economic Policy Institute. Sean O’Leary is the senior policy analyst at the West Virginia Center on Budget and Policy.

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